It’s that time of year again; snowbirds are getting ready to take off for the winter. And they’re leaving by the masses! In 2012, a record 3.6 million Canadians spent time in Floridai alone – that’s 10 per cent of Canada’s population. Before they leave for the sunny south, they’re looking to their advisor to help them make smart decisions about U.S. taxation and insurance.

3 things to address with your snowbird clients:

  1. Taxes – The taxes snowbirds pay depend on how they’re classified. To determine this, the Internal Revenue Service (IRS) uses a formula to calculate the time a snowbird spends in the U.S. over the course of three consecutive years. This assesses whether they should be classified as “substantially present” and liable for having to file a U.S. tax return and foreign asset reporting forms.

    A strong understanding of foundational tax planning can help you deepen your wealth planning knowledge, especially for your snowbird clients. Sun Life Global Investments has partnered with the Knowledge Bureau to offer a CE-accredited complimentary online module–Tax in Practice.

  2. Real estate – Canadians are the biggest foreign purchasers of U.S. residential real estate, owning an estimated $50 billion in Florida alone.ii Florida property taxes for non-resident owners are very high, and there’s a risk of being caught up in U.S. estate taxes if the owner of the property dies. Add in costs associated with owning a property in warmer climates due to pest control, water damage, pool upkeep and hurricanes, and some people might not be able to handle the financial responsibility. If snowbirds are renting out their property at other times during the year, tax on gross rental income and net rental income can be complex, along with the filing requirements.
  3. Insurance
    • Health insurance (for day-to-day health expenses) – Depending on the type of insurance and the province clients live in, limits on the time they can spend away from home and retain coverage can vary. This is valuable information that some clients might not know; help them understand how they can remain covered under their provincial coverage while living in the U.S. part time.
    • Travel insurance (for emergency health expenses) – Snowbirds are planning to spend time in a warmer climate for part of the year. But are they ready to pay for unexpected costs if something doesn’t go according to plan while they’re living in the U.S.? Travel insurance can help cover those unexpected costs, that some might not be prepared for. For those who already have coverage, do they understand their policy’s exclusions and restrictions? Did they disclose all of their health information when they bought their insurance? You can help them understand that if they didn’t, they might not have the coverage when they need it most.

Relaxing beaches and warm weather are certainly attractive qualities for clients heading south –but not if they get caught with unexpected taxes and expenses. A conversation could help your snowbird clients save money, and ensure their trip south is enjoyable. And surprise-free.


i Visit Florida, 2013

ii Paul Dalby, “Avoiding the Snowbirds’ trap.” The Star, February 11, 2013

Originally published on Advisor.ca